iPhone 6 preorders may be up, but profit margins are down

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iPhone
Big and bigger. Warning: profit margins may vary. Photo: Apple.
Photo: Apple

Apple might have smashed its record for preorders with the iPhone 6, but according to a new report from Credit Suisse analysts, profit margins are actually down for the device.

The reason for this is that Apple’s quite literally giving users more for their money: an all-around bigger iPhone which still costs just $649 for its base model.

Production for Apple, however, is considerably more expensive — with the biggest costs being the larger display, improved camera, bluetooth, Wi-Fi and GPS chips.

Image: Credit Suisse
Picture: Quartz/Credit Suisse

According to Credit Suisse, this all adds up to $350.60 per iPhone 6 for Apple to produce. Apple typically receives $599 on the $649 retail price, which leaves it $248.40 (or 41.5 percent margins) in gross profit.

By comparison, the last generation iPhone 5s device resulted in Apple taking $274.30 in gross profit, representing a 45.8 percent margin. The two-year-old iPhone 5 gave better margins still: earning Apple $293.70 per unit, or 49 percent.

But never fear: things are far from looking bad for Tim Cook and co. The “phablet” iPhone 6 Plus is more expensive for consumers to buy than the 4.7-inch iPhone 6, but not especially more for Apple to produce — leaving the company with the same margin as the iPhone 5s, and its highest gross profit per unit since the iPhone 4s in 2011.

Oh yes, and let’s not forget that Credit Suisse also forecasts the highest sales for iPhones in four years in 2015: something that gives Apple an impressive 14 percent year-over-year growth in the product category.

Well played, Apple!

Source: Quartz